Tag Archives: regressive taxes

New Orleans Eventually reading all of this point, counterpoint baloney about the fiscal cliff, debt ceilings, bankrupt social security system, and national debt just makes your head hurt. It’s at that point that you start stumbling around and miss the simple things, like this: “Why in blue blazes is there a payroll tax cap on wages at $113,000 now?”

It was hard to miss the fact that regular working stiffs and pretty well paid swells up to the 6-figure level were all going to return to paying 2% of their share of Social Security payments. The math is easy on this. A $25,000 per year worker will cough up another $500, a $50K worker over the median wages in the USA, will pony up a another cool grand, and a solid executive in most businesses or longshoreman or autoworker with overtime making $100,000, will once again pay another $2000 in order to have real Social Security benefits when they are older. I had to warn most of the folks that work with me about the share they should expect would once again be missing from their checks in 2013.

There are some things that are not so easy to explain.

The first is this cap on payroll taxes at $113,000 making these social security contributions even more regressive. By regressive I mean that salary earners making over $113,000 will pay a smaller and smaller percentage of their annual wage in contributions, as will their employers, compared to what they make. Once again simple math says that if your share of the Social Security contributions is 6.2% of $113,000, you will pay $7006 per year as your share of this government retirement benefit. If you make $400,000 then you will still only pay $7006, so what was 6.2% of your income is only 1.75% at that level. Like I said, regressive, making this another windfall for the richer!

The second is that despite all of this whining and carrying on about Social Security running out of money, if the cap did not exist, then conservative estimates (I’m talking Fox News numbers for cryeye!) say that it would raise $1.3 trillion or more over the next 10 years. That’s $130+ billion a year sports fans, which ought to silence some of the Social Security Cassandras out there.

The third is wonder why Social Security, which is paid for exclusively by employee and employer contributions is conflated by the Republicans and way too many Democrats as if it were a federally financed entitlement, which and somehow connected to the national debt, none of which is true in the least. This isn’t an apples and oranges confusion, this is the outright equivalent of a political P.T. Barnum stunt of trying to fool a certain gross percentage of the public a disgusting amount of the time.

And, given that is exactly what is going on, fourthly, what gives them the nerve to think that they get to raise the age for workers to access the benefits after their lifetimes – and their employers – making contributions towards their retirement, just because they want to grease their own palms with more campaign contributions from their higher earning 6-figure friends?

Let’s left payroll tax cap, make the system more progressive, and see how much of a problem, if any, we have with Social Security then, and onto to some real problems next.